China Pays Heavy Costs of Coal

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Press release - 2008-10-27

China’s coal bill in 2007 was laden with a total external cost of RMB 1.7 trillion, equivalent to 7.1% of China’s gross domestic product (GDP) the same year, according to a new report commissioned by Greenpeace, the Energy Foundation and WWF. The three organizations urge the Chinese Government to set up a fairer pricing system for coal.

Coal mines are like huge scars on the landscape. They damage water resources, cause subsidence, pollution, and ecological damage to the surrounding area.

The report, The True Cost of Coal, outlines the external costs to China of using coal by including the costs of air and water pollution, ecosystem degradation, damage to infrastructure, human injuries and loss of life, and takes into account the distortion of government regulations.

"Environmental and social damages are underestimated while using coal in China, as a result of market failures and weakness in government regulations", said economist Mao Yushi, lead author of the Report. "In order to address these problems, China needs to count these external costs and make the coal price reflect its true costs."

With each tonne of coal consumed in 2007 alone, China paid an extra RMB150 for environmental damage, the report shows. This figure does not factor in the costs of the impacts of climate change resulting from coal combustion, which would make China's coal bill significantly higher.

The report points out that, despite a 23% coal price rise caused by the internalization measures, the plan would have little impact on China's economic growth. On the contrary, it would increase the total social wealth of China by RMB 942.3 billion, ultimately benefitting its people.

"Recognizing the true cost of coal would create incentives to developing cleaner, sustainable energy sources. The government should introduce an effective price signal for coal, which would ensure a massive improvement in energy efficiency and large-scale implementation of renewable energy. This would reduce China's environmental pollution and show its leadership in fighting climate change", urged Yang Ailun, Climate and Energy Campaign Manager of Greenpeace China.